Understanding the Governance of Corporations: Linking theory and practice through an examination of the factors shaping UK supermarket strategies on climate change

Produced as part of the Advancing climate finance and investment CCCEP research programme theme

This paper starts from the premise that our understanding of the extent to which, and of the conditions under which, we might rely on new or neoliberal forms of governance beyond the state to deliver particular public interest objectives is limited, especially when they seek to instigate changes in corporate behaviour.

In response, we briefly explore some of the key elements of debates on ‘governance from the outside’ where public, private and civic actors engage in activities that seek to shape the behaviour or performance of a corporation, and ‘governance from the inside’ where the behaviour of a corporation is shaped by, for example, its structures and systems, resources and opportunities and cultures and values.

We hypothesise that the ability of a particular set of governance conditions to change the behaviour or performance of a business will be shaped by the strength and alignment of a) the range of external governance pressures surrounding the business and b) the internal governance conditions within that business. We then consider the reasons why firms within one key sector (UK supermarkets) have responded to one key issue (climate change) in recent years. We argue that a specific set of governance conditions brought about a step change in the UK supermarkets’ approach to climate change in 2007/8, and that this has triggered a period of improvement in their climate-related performance.

However, we suggest that this process of improvement is bounded by the presence of a business case that simultaneously supports incremental change and constrains the potential for more transformative change.

We conclude by suggesting that if the business case dries up, then governance conditions are likely to be characterised either by collective inaction or by socially-led governance, with its influence being determined by whether the diverse forms of social pressure that are central to it are stronger and better aligned than any associated forms of business resistance. We argue that this has significant implications for our understanding of the extent to which new or neoliberal forms of governance beyond the state can be relied upon to ensure that corporations – or indeed other actors – might help to deliver public interest objectives.